2018 Key Issues Study

2018 Key Issues Study
For Procurement Leaders
Access an on-demand Webinar on
this topic here: http://zyc.us/2FalvaE

ABOUT THE HACKETT 2018 KEY ISSUES STUDY
 For the 2018 edition of The Hackett Group’s annual Key Issues Study, executive management and leaders of
finance, human resources, information technology and procurement organizations at a global set of midsized and
large enterprises were asked in late 2017 about their strategic priorities and initiatives for the coming year.
 The study results, which are analyzed in separate reports for each function, also guided the creation of our 2018
research agenda. Issues cited by participants as top priorities or challenges will be addressed in Hackett research
and webcasts through 2018.
 Digital transformation is referred to several times in these study results. The Hackett Group definition for this term is
the creation of business value by improving customer experiences, operational efficiency and agility by fundamentally
changing the way organizations innovate, operate, deliver products and services, engage with stakeholders and
execute work, using digital technologies as the enabler of holistic transformation.

CONTENTS
Procurement Findings
1. Change in Priorities & Goals
2. Impact of Digital
3. Technology Adoption
4. Link to the Webinar
Access an on-demand Webinar on this topic here: http://zyc.us/2FalvaE

2017 to 2018 Comparison of Top Five most important priorities for Procurement in
the achievement of overall enterprise goals
CriticalHigh
46%
58%
54%
43%
57%
41%
25%
29%
35%
20%
Improve procurement’s
business agility
Elevate the role of procurement
to a trusted advisor
Reduce and avoid purchase
costs
Improve OPEX savings
Enhance operational
process efficiency
87%
83%
83%
78%
77%
48%
61%
55%
64%
58%
39%
23%
26%
13%
11%
Elevate the role of procurement
to a trusted advisor
Improve procurement’s
business agility
Reduce and avoid purchase
costs
Expand purchasing’s scope /
influence
Deepen influence on complex
indirect spend categories
87%
84%
81%
77%
69%
2017 2018
© 2018 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
Source: Key Issues Study, The Hackett Group, 2018

Biggest changes in importance of the procurement agenda from 2017 to 2018
include digital transformation support, innovation and supporting company
25%
33%
28%
36%
53%
28%
43%
48%
53%
58%
Support the company's environmental
sustainability goals
Improve supplier delivery
performance
Improve quality
Strengthen/protect the company’s
brand
Elevate the role of procurement to a
trusted advisor to the business
Biggest Changes (High)
2018 2017
+5%
+17%
+20%
+10%
+3%
0%
5%
14%
9%
7%
23%
8%
23%
23%
25%
38%
38%
Strengthen/protect the company’s
brand
Increase internal stakeholder
satisfaction
Expand purchasing’s
scope/influence
indirect spend categories to drive
value beyond sourcing
Support enterprise innovation
objectives
Support enterprise digital
transformation objectives
Biggest Change (Critical)
2018 2017
+15%
+31%
+16%
+9%
+8%
+18%
YoYδ YoYδ
Represents part of the Top 5

Improving agility, enabling digital transformation and elevating the role of
procurement to a trusted advisor are key development areas in 2018
Reduce purchase
costs
Expand
purchasing’s
scope/influence
Improve procurement’s business agility (i.e., the ability to
adapt
quickly to meet changing stakeholder demands)
Increase internal
stakeholder
satisfaction
Elevate the role of procurement to a trusted
advisor to the business
spend categories to drive value beyond
sourcing
Improve
CAPEX
savings
Improve OPEX
savings
Improve cost avoidance
efforts
Enhance operational
process efficiency
Improve
purchasing
compliance
Support enterprise digital
transformation
strategy, objectives and initiatives
Support enterprise
digital
transformation
ModerateModerate/HighAbilitytoAddress
Well supported
Critical development area
Moderate Importance

Multiple Initiatives Focused on Customer-Centricity
 How can Procurement be more
responsive to stakeholder’s needs?
 Is procurement keeping pace with
Enterprise-wide digitization, or do
users lack a portal to the
procurement process?
 Which processes/platforms
encourage stakeholders to engage
procurement early, extending
influence and elevating
procurement to trusted advisor
status?
Source: Key Issues Study, The Hackett Group, 2018© 2018 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

Procurement Request Management Solutions
Reject inappropriate requests
eSourcing
Contract
Management
Project/
Savings
Management
Supplier
Management/
P2P
ProcurementApproverRequester
Sends
requests
Approves
requests
Manages and
Processes
Requests
Create Contract
Create Sourcing Event
Onboard a Supplier
Pre-purchase Request
Supplier Performance improvement
PO Amendment
Contract Amendment
Task Assignment
Initiating a Project
Price or terms change request by Supplier
Configurable Flexiform
Configurable Approval Workflow
Conditional Logic / Rules
Calculated Fields
Delegation
Comprehensive Reporting
Process Use Cases
Features

Importance in improvement of procurement's capability or performance levels
in 2018
72%
45%
55%
60%
55%
46%
52%
17%
38%
23%
17%
21%
28%
20%
CriticalHigh
Improve procurement analytical, modeling and reporting capabilities
Obtain more value from existing categories through category management
Increase spend influence through strategic sourcing efforts
Align procurement skills and talent with changing business needs
Measure and manage procurement performance and business value
Obtain more value from existing suppliers through supplier relationship
management (SRM)
Improve procurement agility

Procurement needs to stay focused on improving procurement agility, talent and
SRM
Obtain more value from
existing categories
through category
management
existing suppliers through
supplier relationship
management
Increase spend
influence through
strategic sourcing
efforts
Improve procurement
analytical,
modeling and reporting
capabilities
Measure and manage
procurement
performance and
business value
Align procurement skills
and talent with changing
business needs
Integrate contract
management
and procure to pay efforts
Modernize (i.e., consolidate,
upgrade, migrate) procurement
application platform(s)
the transactional purchase-
to-pay (P2P) process
automation
Well supported
Critical development area
Moderate Importance
ModerateModerate/HighAbilitytoAddress

Few Satisfied with Ability to Measure Value to Business
 How can Procurement more
effectively measure and
communicate performance and
value delivered to the business?
 In particular, how can Procurement
align more effectively with Finance
to ensure value contributions are
acknowledged?
 Which processes/platforms can
enable Procurement to create
credibility with the C-Suite and sign-
off from the CFO on value
delivered?

Financial Savings Management Challenges/Solutions
Challenges
• Most organizations tracking with spreadsheets/home-grown
tools
• Existing tools lack Finance collaboration and approval
workflow
• No standard definition of savings calculation and allocation
methods exists, and lifecycle tracking visibility is missing
Solution
Align:
• Import baseline spend from
Spend Analytics
• Establish Finance-approved
spend baseline and savings
calculation formulae on
common, enterprise platform
Validate:
• Employ workflow to obtain
validation from stakeholders
• Map savings projects to
stakeholders and approvers
Analyze:
• Segregate savings by type,
e.g. cost reduction vs.
avoidance, and accounting
period
• Identify savings by
project/sourcing strategy
• Map savings impact to P&L,
Balance Sheet, Cash Flow
Source: Gartner/Rutgers Survey

Case Study – Financial Savings Management
Need
 Inconsistent Spend baselines skew savings opportunities:
 Old Method: Spend = PO – overstates actual spend in some cases and
understates others by excluding non-PO categories
 New method: Spend = Paid Invoice (PO/Non-PO), P-Card, Expense
Report
 Excel, E-Mail based savings tracking methods inefficient and
inconsistent – lacks approvals, version control, agreed upon spend
baseline and consistent calculation and allocation methodology
 Little collaboration across Business Units and geographies due to lack of
enterprise-wide visibility and accessibility
 Finance does not acknowledge Procurement-claimed savings due to
lack of standardized savings calculation and tracking methodology
Business Objective:
To align Procurement
and Finance and
establish Procurement
credibility with C-Suite
by deploying
Enterprise-wide savings
tracking platform and
methodology

Case Study – Financial Savings Management
 CFO sponsorship ensured Finance alignment
 Financial Analysts engaged up-front to establish spend baseline and
methodology – e.g. accounting treatment for CapEx vs. Opex, Cost
Reduction vs. Cost Avoidance
 Global platform rolled out as “Single Version of Truth” with:
 Full audit trail and version control
 Secure user access by BU/Div/Dept/Cat
 Fx conversion and multi-lingual UI
 Flexible/multiple savings types/definitions
 Approval workflow sign-off by budget owner and Finance
 Dashboard analytics tracking and reporting
 CFO views platform as “tool that saves me money” – increased # savings
projects, global spend leverage, and higher savings rate
 Extending procurement’s sphere of influence – savings tracking platform
applied to non-procurement savings projects (e.g. Reorg, ERP
Consolidation, M&A), Budgeting/S&OP, Cash Flow Forecasting
Solution
Results
600+
Savings Projects Initiated
$40-50M
Annual Incremental Savings
Realized To Date
000’s of Users
40 Power Users Create Savings
Projects and Collaborate with
000’s of Stakeholders (600
Financial Analysts Alone)
25% Productivity Gain
Category Managers Save 2
Hours per Day from Data
Gathering Tasks

Procurement major improvement initiatives and alignment with critical
development area
43%
52%
57%
59%
65%
Enhance operational process efficiency
Support enterprise digital transformation* strategy, objectives and
initiatives
Deepen influence on complex spend
categories to drive value
beyond sourcing
Reduce purchase costs
Expand purchasing’s scope/influence
50%
50%
53%
58%
58%
Integrate contract management and procure to pay efforts
Obtain more value from existing suppliers through supplier
relationship management (SRM)
Obtain more value from existing categories through category
management
Improve procurement analytical, modeling and reporting
capabilities
Modernize procurement application platform(s)
Enterprise
Value Related
Issues
Critical Development Area Other Development Area
Procurement
Performance
Related
Issues
Percentage of procurement organizations reporting major performance improvement initiative

P2P/Contracts Integration Seen As Critical Development Area
25%
49%
Peer Top Performer
10% 15%
Peer Top Performer
Indirect E-Catalog Transactions Indirect E-Catalog Spend
If even the Top Performers
capture just 15% of Indirect
Spend through Catalogs, how
can they ensure compliance on
the non-catalog purchases that
account for 85% or more of
Indirect Spend?
Source: Purchase-to-Pay Study, The Hackett Group, 2017

How It Works: P2P/Contracts Integration for Non-Catalog
PURCHASE ITEMS
DIRECTLY
FROM CONTRACTS
(Non-catalog Purchases)
“Contract Lock”: P2P/Contracts Process Integration
TAG THE CONTRACT
NUMBER IN ALL
PURCHASE
REQUESTS
VIEW TIERED
BASED
PRICING FROM
CONTRACTS
REVIEW TERMS
AND CONDITIONS
IN CONTRACT
ATTACHMENTS
WHILE ORDERING
LINK NON-PO
INVOICES
WITH EXISTING
CONTRACTS
VIEW PAST AND
EXISTING
REQUISITIONS
@On-boarding to flip contract-to-catalog
@Requisition for non-catalog pricing/terms
@PO for contract reference/utilization
@Invoice for non-PO invoice resolution
P2P/Contracts Integration Touch Points:

Procurement’s current level of concern about each of following types of risks /
Level of change anticipated in next two years for each type of risk
31%
29%
24%
15%
26%
9%
3%
3%
54%
57%
56%
59%
37%
43%
49%
38%
14%
14%
21%
26%
37%
49%
49%
59%
Geopolitical risk
Financial crisis
IP theft / industrial espionage
Disruptive innovation
Regulatory risk
Intensified competition
Access to critical talent
Cyber / information security
Minor concern Moderate concern Major concern
6%
3%
9%
3%
76%
76%
79%
59%
61%
56%
50%
45%
18%
21%
21%
32%
36%
44%
50%
55%
Decrease Neutral Increase

CONTENTS
 Procurement Findings
1. Change in Priorities & Goals
2. Impact of Digital
3. Technology Adoption
4. Link to the Webinar
Access an on-demand Webinar on this topic here: http://zyc.us/2FalvaE

Digital transformation is poised to fundamentally change procurement… but
few have the strategy or resources in place to make it work
42%
40%
53%
53%
95%
93%
Digital transformation will fundamentally change the way procurement
services will be delivered over the next 3-5 years.
Digital transformation will offer step-change performance (cost, quality,
cycle-time, etc.) improvement of the procurement function.
Agree Strongly Agree
Importance of each objective or issue
48%
45%
40%
18%
17%
6%
66%
62%
46%
Our procurement function has developed and is executing a digital
transformation strategy.
Our procurement digital transformation strategy is aligned with or
integral to the enterprise digital transformation strategy.
Our procurement function has the resources and competencies in
place to execute the digital transformation strategy.
Procurement
execution
capability
Procurement
impact

Case in point: only 66% have a digital transformation strategy; and even fewer
report having the right resources and competencies in place today
Report that digital transformation will fundamentally change the way procurement services are
delivered over the next 3-5 years
95%
66%… but only
have actually developed a strategy for getting there.
… and only
46%
report having resources and competencies in place to
execute the strategy today

Digital Transformation Comparison: business services functional executives
believe it will have a profound impact, BUT the vast majority are not ready for it
… but only
97%
35% Finance
report having resources and competencies in place to
execute a digital transformation strategy
94%
46% HR
94%
36% IT
96%
46% Procurement
100%
50% GBS Organizations
97%
35% Finance
report having resources and competencies in place to execute a
digital transformation strategy
94%
46% HR
94%
36% IT
95%
46% Procurement
100%
50% GBS Organizations
© 2018 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. Source: Key Issues Study, The Hackett Group, 2018
Report that digital transformation will fundamentally change the way services are
delivered over the next 3-5 years

A small percentage of staff will lead the charge to digitally transform
procurement processes
Digital Transformation Organizational Impact
8%
30% 27%
Percentage of procurement staff currently
involved in execution of digital
transformation initiatives
Percentage of procurement processes in
scope of digital transformation initiatives in
2018 and 2019
Percentage of total procurement roles that
will be impacted by digital transformation in
2018 and 2019

While a majority of procurement organizations have either completed or are currently
piloting digital transformation, they note only a moderate ability to support it
18%
35%
21%
26%
Digital Transformation projects over the
past three years
No plans Exploring Piloting Completed
9%
57%
30%
4%
Ability to support Digital Transformation
(strategy, objectives and initiatives)
Low Moderate High Very high

21% plan to consolidate to a single source to pay platform… but only 10% have
achieved that goal today
10%
17%
21%
21%
31%
Our goal is to consolidate all source-to-pay applications on a single
platform but we still have disparate tools in place today
We have a “best of breed” strategy which allows us to pick and choose
individual solutions based on how well they meet our requirements
We use our ERP provider for all source-to-pay processes with only
limited exceptions
We use our ERP and a single source-to-pay solution for the majority of
processes
We use a single source-to-pay software provider with limited
exceptions
Which statement would you say best describes your source-to-pay technology strategy?

Many Organizations Plan to Deploy Single Platform S2P Suite
 Which modules constitute a full
S2P Suite?
 What are the use cases
enabled through a single
integrated S2P suite?

Connecting the Dots….for a Single Version of S2P Truth
Request
Management
Project
Management
Spend Analytics Sourcing Contracts
Supplier
Management
Supplier
Performance
eProcurement eInvoicing
Request and track
Contract creation
Create events
from requests
Create, track and
manage sourcing
projects
Review past
performance before
inviting suppliers
Create sourcing
projects
Convert PRs to
RFP and award
POs
Validate contract terms for
catalogs, PO to contract
matching
Update preferred
vendor lists
Refer master
data for creating
invoices
Review supplier
history
Create, track
and manage
contracts
Transfer
Attachments, T&Cs,
Pricelist for Contract
creation
Create and invite
potential suppliers
Control Layer
Strategic Layer
Operational Layer
Refer
supplier data
Review supplier scores
before ordering

When it comes to mainstream technology in procurement, cloud based applications
and advanced analytics will lead in adoption over the next 2-3 years
45%
79%
22%
67%
16%
60%
20%
63%
20%
40%
11%
21%
36%
9%
47%
14%
44%
23%
38%
21%
33%
35%
29%
42%
82%
88%
69%
81%
60%
84%
58%
84%
53%
74%
40%
63%
Currently 2-3 Years Currently 2-3 Years Currently 2-3 Years Currently 2-3 Years Currently 2-3 Years Currently 2-3 Years
Cloud-based applications/SaaS Data visualization tools Master data management
technologies
Advanced analytics Mobile computing Social media/collaboration
Mainstream adoption Limited adoption
Mainstream Technologies
74%
2.1x 3.9x
3.1x
2x
88%

Business-to-Business marketplaces are becoming increasingly common among
procurement organizations
47%
35%
12%
Using a Supplier Network as part of a larger solution
(e.g., Basware, Coupa, Jaggaer, Perfect Commerce,
SAP Ariba, Taulia, Tradeshift)
We are currently evaluating the options for using a
Supplier Network
We have no plans to use a Supplier Network

When it comes to emerging technology in procurement, RPA, IOT and Cognitive
/ AI will lead in adoption over the next 2-3 years
9%
33%
7%
30%
4%
16% 17%
7%
18%
23%
18%
33%
11%
35%
11%
26%
9%
28%
27%
56%
24%
63%
16%
51%
11%
43%
9%
35%
Current 2-3 years Current 2-3 years Current 2-3 years Current 2-3 years Current 2-3 years
Internet of things Robotic process automation Cognitive computing/artificial
intelligence
Virtual assistants/chatbots Blockchain
Mainstream adoption Limited adoption
Emerging Technologies
3.7x
4.5x
3.6x
3.9x
3.9x

Mainstream & Emerging: Some procurement organizations are piloting emerging
technology with RPA, blockchain, cognitive/AI and chatbots
38%
33%
31% 31%
29%
24% 24%
20%
16%
13%
7%
Robotic
process
automation
Blockchain Cognitive
computing / AI
Virtual
assistants /
chatbots
Master data
management
technologies
Advanced
analytics
Social media /
collaboration
Internet of
things
Data
visualization
tools
Mobile
computing
Cloud-based
applications /
SaaS
% of procurement organizations currently piloting the technology
Mainstream Technology Emerging Technology

Speaker Contact Information
Richard Waugh
VP of Corporate Development
Zycus
Email: richard.waugh@zycus.com
Chris Sawchuk
Principal & Global Procurement Advisory Practice Leader,
The Hackett Group
Email: csawchuk@thehackettgroup.com

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2018 Key Issues Study

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